The U.S. dollar rose against all the major currencies last week. It also appreciated against most of the emerging market currencies, save two from Latam (Mexico and Peru) and two from Asia (Philippines and Malaysia). The U.S. January jobs report on February 1, coupled with disappointing European data and a less hawkish Reserve Bank of Australia, helped the dollar recover from the lower end of its recent ranges. The return of Chinese participants from the week-long Lunar New Year holiday, the data calendar and events (here) point to the risk of higher volatility. The dollar has approached the upper end of those recent ranges on several currency pairs. The ranges may fray, but we do not expect the macroeconomic data to encourage a sustained break quite yet.

Dollar Index: The Dollar Index closed firmly ahead of the weekend, its seventh consecutive higher close. In this time, since the ECB meeting, the Dollar Index has rallied from almost 95.15 to almost 96.70. Last month's high was just shy of 97.00. Although the RSI is overextended, the other technical indicators do not appear to stand in the way of additional near-term gains. At the end of last year, the Dollar Index recorded the year's high near 97.70. Technicians note that this is a little short of the 61.8% retracement of the sell-off that began in early 2017. A break now below around 96.25 could be seen by short-term participants as a sign that the momentum is flagging and that the easy money is gone.

Euro: The euro moved lower every day last week. It was the first time it has happened since last May. Last week the euro fell about 1.15% against the U.S. dollar. Back in May, it lost 1.4% in its week-long slide, which was part of a six-week tumble. The poor close ahead of the week may see the euro pressed to the lower end of its $1.13-$1.15 range. The question is not really so much whether the range will break but whether a break is sustained. The one-week 25 delta risk reversals (the skew between puts and calls) shifted last week from favoring calls to favoring puts as it tracks spot. We continue to favor fading the break, though making money in the range means likely not being positioned for the break.

Yen: The dollar traded between roughly JPY109.45 and JPY110.16 last Monday, February 4 and remained in that range versus the yen the rest of the week. Yet the close moved higher in the first part of the week and slipped in the last two sessions. It remains within spitting distance of JPY110.00, which it has not closed above here in 2019 yet. The extended sideways movement prevents the technical indicators from generating a consistent signal. A break below JPY109.30 might be an early signal that the market is giving up on the JPY110.00 cap. The dollar-yen rate often appears to be range-bound, but the lower end of the range is not clear, but the initial test could be on JPY108.50.

Sterling:Sterling has fallen in eight of the past ten sessions. The six-week rally ended in January and has been followed by a two-week slide. The two-week drop saw it give back nearly half of its rally. Resistance is seen near $1.3000 and then again by $1.3040. The 200-day moving average is between the two points by $1.3025. Despite sterling having been sold to $1.2855 last week, it did not close once below$1.2930. The MACDs and Slow Stochastics warn of the downside pressure may not have been exhausted.

Canadian Dollar: Even after Canada reported stronger than expected employment and wage growth, the U.S. dollar finished the week nearly 1.35% higher. It was the biggest weekly gain of the year. The pullback spurred by the Canadian employment data found near U.S. dollar bids near CAD1.3230, a retracement objective of this month's run-up that had begun near CAD1.3070, and just below the 20-day moving average (~CAD1.3240). The greenback faces chart resistance by CAD1.3330 and then CAD1.3375. The MACDs and Slow Stochastics have only recently turned higher, and suggest the U.S. dollar's recovery may have legs.

Australian Dollar: As last week progressed, the shift in the Reserve Bank of Australia's position became increasingly clear, culminating in a cut in its GDP and inflation forecasts, which helped drive the Australian dollar to its lowest level in more than a month (~$0.7060). The RSI is overextended, but the Slow Stochastics show a bearish divergence and the MACDs crossed lower at the start of last week. A bounce toward $0.7100-$0.7120 may offer a lower risk entry point for bearish participants. That said, the Aussie has entered a band of congestion that extends to $0.7000. The surge in the price of iron ore has done Australian dollar little good, though if it ticks higher some will try to make the link.

Oil: Light sweet crude oil for March delivery stretched to its highest level (~$55.75) in more than two months at the beginning of last week. The break higher was a head fake, and it came back quickly into the well-worn range of $50-$55 a barrel. Support was found near $51.80. The RSI looks set to bounce, but the MACDs are poised to turn down, and the Slow Stochastics did not confirm the recent high, leaving a bearish divergence in its wake. The five-day and 20-day moving average cross-over signal has been reliable over the past six months, and the former is set to fall below the latter at the start of the week. Look for participants to turn cautious as the bottom end of the range comes into view. The 100-day moving average is found near $51.

U.S. Rates: As the middle of the first quarter is approached, it is notable that the S&P 500 is up over 8% this year, while the U.S. 10-year yield is off five basis points and the 2-year yield slipped almost three. The 10-year yield fell nine basis points last week to 2.63%. Here in early 2019, the decline in yields among the major industrialized nations is unexpected, especially given recovery in equities and risk appetites in general, and end of the G3 central banks expanding their balance sheet on a net basis. The March 10-year note futures contract will begin the new week with a four-day advance and a three-week rally in tow. The momentum is strong, and the late January high of 122-19 is the next target and beyond that is the flash crash (January 3) extreme of 123-08. The implied yield of the July Fed funds futures contract is 2.385%, a little below the current effective average rate of 2.40%, suggesting a small chance of a rate is being discounted. The implied yield has eased for the past three weeks.

S&P 500: On February 5 and 6, the S&P 500 stalled ahead of the 200-day moving average. The previous support becomes resistance. The index gapped lower on February 7, and although there was some follow-through selling on February 8, it was marginal, and the close was on session highs, just above 2700. The gap is the first hurdle on the upside. It is found between 2719.3 and 2724.2. The 200-day moving average is a bit higher at 2742. Yet, the MACDs and Slow Stochastics appear to have already begun turning lower. The inability to fill the gap before the S&P falls again would point to another leg lower than could take the index toward 2600.

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